The Real Reason Mass Transit Fares Are Rising Across the U.S.

Hardly a month goes by without a city transit agency announcing a fare increase. That's the unequivocal conclusion from a quick Google search of large U.S. cities. Boston's MBTA proposed an increase just last week. The D.C. Metro presented a plan for one the month before that, at the same time San Francisco's Muni riders prepared for one. The Los Angeles MTA chimed in with a recommended hike the month before that. And on and on.

The reason local agencies seem to need so many fare increases is that they do a poor job keeping the price of taking a ride near the cost of providing it. Just how poor a job comes through in a new data-filled report from the U.S. Department of Transportation on the state of American transport.

Let's first look at the average fares per mile from 2000 to 2010 for the ten largest U.S. transit agencies (see chapter six of the report, or the asterisk below, for a list). We see that despite the frequent news reports of fare hikes, the cost of a ride hasn't changed much, when dollars are kept constant. In 2000 the average fare (per mile) was $3.61; in 2010, it was $3.99. That's a 10 percent increase over a decade, or 1 percent a year.

Compare that to the average cost of operating the service per mile over the same period (again, with dollars constant). In 2000, that cost was $9.05; in 2010, it had climbed to $10.82. That's an increase of 19 percent — or about 2 points a year — nearly doubling the growth rate of fares.

And so we see an ever-widening gap between what the biggest transit agencies spend running their service and what they recover from riders. (Here we're talking about day-to-day or "operational" expenses; capital expenses, used for infrastructure and equipment, are considered separate.) In 2000, the top agencies recovered nearly 40 percent of their costs through fares. That figure has since dipped below 37 percent.

Here's the picture altogether:

Taking the wider view of all U.S. transit systems, we see that this recovery ratio has trended downward in the past decade even as funding for transit operations has trended up. The share of system-generated funds — that's primarily fares, though it can also include things like platform and in-car advertisements — has increased almost 4 percent since 2000. The share of federal and state funding, meanwhile, has increased 8 and roughly 14 percent, respectively. From the DOT report:

Now it's important to point out that not all modes of transit recover (or, more appropriately, fail to recover) their fares at similar rates. In fact the differences can be quite dramatic. In 2010, heavy rail (e.g. subway systems) recovered about 62 percent of their costs at the farebox. Commuter rail, meanwhile, recovered about half. But buses and light rail fares only covered about a quarter of their operational costs — 26.7 and 27.5 percent, respectively.

So why is the gap widening so much? There's no single or simple answer, of course, but the growth in operating costs since 2000 has been a major factor. It's not so much the salaries of agency employees — those increased a modest 4 percent (once again limited to the top 10 agencies). It's the fringe benefits (like health care) and labor that have jumped: 45 percent and 19 percent, respectively.

Again, there are many reasons why fares don't keep pace with costs. As a general rule, U.S. agencies keep fares low on purpose to provide affordable transit as a public service, relying on subsidies for funding help. In other words, agencies don't expect to eliminate the gap. But until they do a better job minimizing it — coming somewhere closer to ajar than to gaping — you can expect another fare hike coming your way soon.